The most important difference between litigation and arbitration in China is that judges and arbitrators have different ways of thinking.
When most people refer to the difference between Chinese litigation and arbitration, they are likely to say that arbitration is fairer than litigation because Chinese judges may render unfair judgments, while arbitrators in Chinese arbitration institutions are relatively better.
Indeed, in a few cases, judges may be affected by external factors and render unfair judgments. However, in most cases, the judge is fair, or the judge wants to make a fair judgment and therefore makes a judgment that he believes to be fair. Given that Chinese courts impose strict supervision over the judges, external factors that can affect the judges in most cases do not exist, and most of the judges are also required to adhere to judicial justice in view of their legal education, in most cases the judges will not deliberately make an unfair judgment.
I believe that the difference between litigation and arbitration in China is that judges and arbitrators have different understandings on justice, and thus the way of thinking in case trials is different.
As I mentioned before, the judge will pursue the unification of legal effects, social effects and political effects in trial activities, which affects their judgment on justice. However, arbitrators are very different from the judges in these three aspects.
1. The judge pursues the legal effect, while the arbitrator needs not
Judges tend to apply the law strictly. Therefore, if the parties do not agree on the terms of the transaction or the agreement is unclear, the judge may not try to explore the authentic agreement (genuine intention) of the parties as much as possible, but prefer to adopt the terms of the transaction stipulated by the law; even though the Chinese law clearly stipulates that when judging the parties' terms of the transaction, if the parties have agreed thereupon, such agreed terms shall prevail.
The arbitrator is more concerned about the agreement of the parties. Most arbitrators are familiar with commercial transactions, so even if the parties do not agree on the terms of the transaction or the agreement is unclear, the arbitrator can understand the actual agreement through the hearing, and then make a ruling according to the agreement. In contrast, most Chinese judges have been admitted to the court since graduating from law school and have no other professional experiences, so they are not familiar with various commercial transactions.
In addition, the workload of Chinese judges is extremely heavy, which also causes them to not have enough energy to fully understand the parties' transactions, and therefore choose to strictly apply the law, which is the most time-saving and least likely to be accused.
2. The judge pursues social effects, while the arbitrator needs not
When a Chinese judge hears a case, he will consider what the public attitude may be towards the case in order to avoid the public’s distrust of the court, the judicial system, and the governing authority. In recent years, the online court judgments and online court trials broadcasts have put the work of Chinese judges under more public supervision, which further increases pressure on judges in this area.
While arbitration is not open to the public, which makes the arbitrators not subject to the public opinion. Therefore, the arbitrator only needs to gain the trust of the parties to the case.
3. The judge pursues political effects, while the arbitrator needs not
Judges need to reflect specific political objectives in the trial of cases based on certain judicial documents issued from time to time. These political objectives set standards for fair judgment in specific situations, for example, to make China's business environment better.
Arbitrators are not affected by political goals. On the one hand, Chinese laws clearly stipulate that an arbitration institution is independent of and not affected by the administrative organ. In order to enhance the competitiveness of Chinese arbitration institutions, the Chinese government does respect the independence of arbitration institutions. On the other hand, arbitrators are mostly served by Chinese and foreign university professors, lawyers, and retired judges. Their professional identities are more independent from politics and therefore do not consider specific political objectives when hearing cases.
4. Chinese Arbitration Institutions
It should be noted that the arbitrator mentioned above refers to the arbitrators of a few arbitration institutions, such as the China International Economic and Trade Arbitration Commission (CIETAC), the Beijing Arbitration Commission (BAC), the Shanghai International Economic and Trade Arbitration Commission, and the Shenzhen Court of International Arbitration (Shenzhen Arbitration Commission). These arbitration institutions are more international. Moreover, in order to win in competition with domestic counterparts and foreign arbitration institutions, they also emphasize the independence of arbitrators and the concerns on the transactions of the parties.
In contrast, for other Chinese arbitration institutions, the heads of which are usually served by local government officials, and the arbitrators of which are mostly served by local civil servants or judges, therefore the arbitrators’ thinking is not much different from that of judges. This has led to little difference between arbitration and litigation in terms of the way of case hearing and the ruling/judgment. Now, there is a debate about "Litigationization of Arbitration" (仲裁诉讼化) in China. I think it may be because of the existence of these arbitration institutions that this discussion will be triggered. “Litigationization of Arbitration” refers to the trend that arbitration in China is becoming more and more similar to litigation: the arbitral procedure and the litigation process are increasingly homogenized, that is, more and more complicated and strict; the arbitrator handles the case like a judge and renders a ruling. For example, they tend to make decisions based on judicial interpretations issued by the Supreme People's Court and with reference to court precedents. In China's legal profession, some people welcome this trend, while others worry that arbitration will lose its unique position.